RBI aims to simplify foreign investment rules, seeks comments by 31 August

Published 21 July 2026 · local

Mumbai: In order to reduce the compliance burden and make it easier for foreign investors to do business in India, the Reserve Bank of India

Mumbai: In order to reduce the compliance burden and make it easier for foreign investors to do business in India, the Reserve Bank of India (RBI) on Tuesday released draft rules to simplify the country’s foreign investment regulations and align them with the government’s foreign direct investment (FDI) policy. The rules, open for public comment till 31 August, follow the Budget 2026-27 call for a review of non-debt instruments (NDI) rules to modernize India's foreign investment framework, RBI said. One of the biggest changes proposed is a clear separation of the government’s FDI policy from the Foreign Exchange Management Act’s (Fema) operational provisions. Under the draft, procedural provisions stay under Fema, while sectoral caps and entry routes move to the government's FDI policy.

RBI will govern operational matters, such as payment modes and reporting, through regulations and circulars. Building on measures The changes build on steps taken last month, when RBI and the finance ministry expanded a portfolio investment scheme (PIS) to individuals resident outside India, increasing the investment cap for an individual Persons Resident Outside India (PROI) under the scheme to 10% of a company's paid-up capital from the existing 5%, while the aggregate limit for all such investors has been raised to 24% from 10%. To operationalise the changes, the department of economic affairs had notified the Foreign Exchange Management (Non-Debt Instruments) (Third Amendment) Rules, 2026. RBI will administer the rules, while interpretation of the foreign investment policy will remain with the department for promotion of industry and internal trade (DPIIT).

RBI said the move would provide a clear demarcation of procedural Fema provisions from policy and sector-specific requirements, improving regulatory coherence and facilitating timely policy changes. The draft also broadens the scope of eligible investee entities. Apart from companies and limited liability partnerships (LLPs), it explicitly includes Securities and Exchange Board of India-regulated investment vehicles such as Real Estate Investment Trusts (Reits), Infrastructure Investment Trusts (InvITs), Alternative Investment Funds (AIFs), venture capital funds, mutual funds, Exchange Traded Funds (ETFs), partnership firms and proprietary concerns registered under applicable domestic laws. Consolidating modes The draft further consolidates the various permissible modes through which a resident outside India or a foreign-controlled entity may invest in or acquire equity. These include subscriptions to an issue, purchases, pledges, depository receipts, investments by non-resident (NRIs) and Overseas Citizens of India (OCIs) in the Pension System, and foreign investment through international stock exchanges, subject to conditions.